Habits and heterogeneity in demandsA panel data analysis
- Collado Vindel, M. Dolores
- Browning, Martin
Datum der Publikation: 2006
Nummer: 25
Art: Arbeitsdokument
Zusammenfassung
We examine demand behaviour for intertemporal dependencies, using Spanishpanel data. We present evidence that there is both state dependence and correlatedheterogeneity in demand behaviour. Our specific findings are that food outside thehome, alcohol and tobacco are habit forming whereas clothing and small durablesexhibit durability. We conclude that demand analyses using cross-section data thatignore these effects may be seriously biased. On the other hand, the degree ofintertemporal dependence is not sufficiently strong to make composite `consumption'significantly habit forming, as has been suggested in some recent analyses.